In what cases would terminal value comprise a high percentage of value in a DCF?

Answer

Terminal value dominates when: (1) Short projection period (5 years vs. 10) — less FCF in the explicit forecast; (2) Low or negative near-term FCF — early-stage or growth companies pour cash into growth, so the value lives in steady-state cash flows; (3) Heavy investment in the explicit period (high CapEx, working capital build); (4) High terminal growth rate or low WACC — both pump up the TV math (1 / (WACC − g)); (5) Long-duration assets (utilities, infrastructure).